Market Insight - May 2016
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  "£28 billion worth of homes were completed in March"    

The Storm before the Calm?
Race to beat stamp duty deadline drives March transactions.

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Buying activity in the market surged as a reaction to the introduction of the government’s new stamp duty rules that came in on the 1st of April. Buyers, particularly those buying in the northern markets, brought purchases forward to avoid the additional three per cent charge.

Countrywide market estimates show that £28 billion worth of home sales were completed in March, a 76 per cent increase on last year. Many of these sales only just made the cut off with 60 per cent of them completing in the last two weeks before the tax changes came into effect. 

The rush to secure homes before the deadline was particularly pronounced in the northern markets where there was the highest growth in transactions. In the North East, the last 2 weeks in March saw transaction numbers increase by 146 per cent compared to the same period in 2015. Similarly, in Yorkshire & the Humber, transactions were up 133 per cent. In the capital, transactions grew by 74 per cent, amounting to £5.4 billion pounds worth of homes sold, almost a third of the total amount spent that fortnight.

Ironically, the short‐term effect of the government’s policy, designed to reduce the attractiveness of rental homes as an investment, was to increase the amount of homes bought by landlords. In the two weeks leading up to the stamp duty change, half of all homes sold were to landlords. 

However, now the new stamp duty is in place, activity in the market should begin to decrease. The intense activity seen in March will most certainly fade away as some investors consider the viability of any new investments given the higher costs. 

Sentiment in this market may already be on shaky grounds as government policy continues to indicate a clamp down in the market while the Bank of England also looks to set stricter lending rules for investors. Additionally, with the Brexit vote looming, the uncertainty in the result may also cause some investors to pause before making any big purchases. 

The intended effect of the government’s policy is for investors to be replaced by first‐time buyers who should now face less competition when buying a home. But with affordability issues still present in the market, it is questionable if they’ll be in a position to replace investors immediately. So we could be in store for slower transaction growth in the immediate future.


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